First batch of foreign banks allowed to access onshore Yuan on the mainland interbank FX market

Friday, May 20th was the first day when foreign commercial banks were allowed to trade yuan on the recently opened inter-bank forex market. The first batch of the banks will be able to trade both spot RMB and derivatives.

The list includes Chinese banks ICBC (Asia), China Merchants Bank Hong Kong, and non-Chinese banks CTBC Bank, Taipei Fubon Bank, Standard Chartered and Citibank.

Commercial banks follow foreign central banks that were approved earlier in September 2015 to trade spot RMB, swaps and futures on the onshore market. Currently any entity that needs to exchange other currencies to RMB do so on the offshore RMB market, which has different exchange rates from the Mainland markets and lower liquidity.

The FX market opening up is going in tune with the opening up of another interbank market – the bond market. The combination will increase the convenience of international yuan use, as the fx market lets to buy the currency and the bond market lets holders invest it.